Expansion may have to wait as ANZ has enacted stricter measures in lending for owner-occupier borrowers as well as rental property investors. ANZ implemented a reduction in the Loan to Value Ratio limits. By doing this, they also limited the power of investors in buying sections of the said plan.
Income tests have become harsher and rules for interest-only loans have been tightened. Changes in tax and assessments in rents and repayments, among others, have put the squeeze on buyers and investors. These buyers and investors, News AU reported, bought Australia's vacant residential real estate. They brought it in the hopes of creating a source of income for when they retire.
The rules have made it that investors won't be able to partake of that chance anymore. This is because the basis the ability to repay has been raised to between 7.25 and 8 percent contrary to the old 4 percent interest rate. Interest-only loans have also been made harder to continue and come by, while a property's rental income is only good up to 70 percent to investors. These rules have effectively made it next to impossible to pay investment loans, even if an investor has the means to afford it.
In New Zealand, as with the rest of the world, house prices have been rising up quick but this is due to the fast lending growth to those investing in rental property. More than 40% of the houses already belong to them, hence, the stricter measures. This is to allocate property to those who really need it.
ANZ's Head of Mortgage Adviser Distribution Baden Martin confirmed this fact. He said that the changes will re-position ANZ to account for supply pressure in some areas and to ensure continued support for the people of New Zealand's financial interests, as stated by Interest.
New Zealand and Australia share the same attitude of worrying about things when it happens, not as it happens. In a financial context, Financial managing director Angelo Benedetti pointed out that most investors in Australia preferred to focus on the initial lower cost of the interest-only loans. That is until they come face-to-face with the remaining debt to be paid over to the tune of 25 or 30 per year on a year loan term.
The positives point toward the relaxing of the market for investors next year. However, at the moment, borrowers will have to make do with all the rules.
